In a recent notification, the Ministry of Corporate Affairs provided for simplification of Sect...
According to Section 8, that a person or an association of persons who propose to register themselves as a limited company with an objective of promotion of commerce, art, science, sports, education, research, social welfare, religion, charity, protection of the environment, or with any other objective, who to apply its profits for the promotion of the purposes mentioned above, and who intends to prohibit the payments of any dividend to its members.
The Central Government being satisfied may bring the company as a limited but without the addition of the word limited and private limited at the end. But the company enjoying the benefits and also the obligations as of limited company.
The purpose of Section 8 is to have one uniform law across the country as given under the Companies Act, 2013. It is the Companies Act that regulates the formation, management, and accountability of Section 8 under the Companies Act, making it more closely controlled and monitored trust and societies recognized all over the world.
The following conditions must be fulfilled:-
The intention of the creation of Section NGO/NPO is to promote activities s mentioned in it.
No sharing of profits between the directors and members in the association directly or indirectly.
Members cannot draw any compensation in any cash or kind.
There must be two directors in case it is a Private Limited Company. There must be 3 Directors in case it is a Public Limited Company.
According to section 149(3), there must be at least 1 Indian Resident who must have stayed in India for a period of 182 days.
If the company is a public or private company registered, its MOA must have 2-3 subscribers.
Whatever the amount has been proposed to be invested by the company must be funded within 2 months to the company.
The surplus created must be for the purpose of only to meet the objectives of Section 8.
Section 8 Companies can only be wound by the specific procedure of the bye-laws of the society. After paying the debts and liabilities, the funds and properties of the company are not to be distributed among the members of the company. While the funds to be transferred to some other Section 8 Company that has these similar objectives.
All the directors must have the Director Identification Number and Digital Signature Certificate.
There has to be an annual filing of returns and accounts and statements of the company with the ROC.
The property of Section 8 can be sold only according to the Companies Act 2013. The Act is particular about the sale with the consent of all the directors.
Changes introduced for the incorporation under Section 8;
Read our article:NGO & Section 8 Registration in Delhi
The incorporation norms/ Registration of Section 8 companies have been amended via 6th Amendment Rules on 7th June 2019. The current rules have made the registration in Section 8 easier. The new rules have completed the registration under Section 8 through a single form in SPICe.
A. Collection of required documents
B. Incorporating the Section 8 Company
C. Filling of the SPICe Form
D. Procedure for filling the Web Form
The benefits which can be seen from the registration under Section 8 is that it starts with the least capital; requirement, it has maximum tax benefits, no need to pay stamp duty, the company has a separate legal identity like any other corporate, and the most significant advantages which the members/ donators derive is the exemption on their donation under Section 80G of Income Tax Act 1961. The credibility of Section 8 Company is way more than any other trust, charitable organization, or society.